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Etsy CEO on upcoming holiday season and inflation concerns

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  • ETSY

Yahoo Finance Editor-at-Large Brian Sozzi talks with Etsy CEO Josh Silverman on the recent growth in website activity as well as what to expect in the upcoming holiday season.

Video Transcript

BRIAN SOZZI: So Josh, it is the holiday season. You and your team prepare all year long, essentially, for this week. What's your holiday season outlook?

JOSH SILVERMAN: Yeah, I mean, not just us, but our sellers, right? So you're right, we work all year to make sure that our sellers are fully prepared, that the Etsy website is delivering what people expect. And I think we're at a moment where circumstance is meeting preparedness. So we gave our outlook at the end of the third quarter, just a few weeks ago, and it was robust. It was really strong for the fourth quarter.

In fact, we said that comparing this fourth quarter to 2019, so pre-pandemic, at the midpoint of guidance, we'd grow 143% year over year. So we're obviously incredibly pleased by that. We think this is a moment when our sellers, when small businesses really have a chance to step up and to shine, and to show what they can do.

BRIAN SOZZI: What are they doing? What are some of the top trends you're seeing on the platform?

JOSH SILVERMAN: Yeah, so we are seeing a big return to entertaining. Maybe not a big surprise, but people are really excited to be in person again this season. So you're seeing things like tablescapes really selling really well. So that's things like place settings. We're seeing barware and things like that. You're going to be together with your family, let's have a drink. That's doing really well. The big colors this year, bold and bright colors are in. People are really wanting to celebrate, and they're wanting to go bold.

BRIAN SOZZI: I could certainly use a couple of gin and tonics there, Josh. It's been a heck of a year. And when you talk to your sellers, I imagine they're facing a couple challenges. There's the inflation challenge. And if you're a small business owner, I imagine you're having a tough time hire workers. What are you hearing from them?

JOSH SILVERMAN: Yeah, I mean, there's no doubt that there's a lot of challenges. And I certainly think it's important to acknowledge those across the whole economy. There's health care challenges. There's social justice challenges. There's economic challenges. There's a lot going on in the world. A lot of people laid people off during the pandemic, and they're having a hard time attracting workers back again.

2/3 of Etsy sellers said that their sales stayed the same or grew through the pandemic. So actually, our sellers on average-- and of course, every seller is a little different, but on average, our sellers have actually been growing and hiring and thriving because this is a moment when I think they've had a chance to shine, when so many trends over the past decade have been in favor of the mega corporations.

And I think it's a welcome change to see small businesses have some tailwinds, where they get a chance to really step up and show what they can do. And they have. And buyers have liked what they've seen from Etsy sellers, and so they're coming back again and again and again. And we're incredibly excited by that.

In terms of what challenges we're hearing from Etsy sellers, we've been encouraging them to stock up early. So they started supplying themselves in August and September. So actually, our survey data says they are less concerned about supply chain challenges this year than they were last year. And in terms of inflation, we've been checking that. We've been doing basket of goods analyses, and we've seen very little price inflation so far this year. So you know, we'll see how that plays out, obviously, as their input prices rise, but so far, we're not seeing it on our marketplace in a significant way.

BRIAN SOZZI: Are small business owners, just staying on there, are small business owners eating these costs that-- these higher costs that they're seeing?

JOSH SILVERMAN: Yeah, it's a good question. So it's reasonable to expect that we will see their input prices go up. And so they're going to have a choice, one of two things. They're either going to pass those prices along to consumer and raise their prices and sustain their margins. And I think some of them are going to choose to do that, and that's a very sensible thing for them to do. Others might choose to eat some of the cost themselves, have lower margins, but maybe be more competitively priced relative to the market, and therefore see more volume. So I think both of those strategies are going to make sense. I think we'll probably see both play out on the Etsy marketplace.

BRIAN SOZZI: When you talk to sellers, have you heard from them that the pandemic has perhaps caused them to reset how their own supply chains are structured? Do you hear from them they want to bring more of what they're buying or just selling back to the US?

JOSH SILVERMAN: You know, actually, Etsy sellers have always been largely US-based, the ones that are based in the US. Let me say Etsy sellers have always been largely locally based. And as a result, we haven't been hearing as much from them about their supply chains as others. So our sellers say 93% of their raw materials come from within their own country. So they have been sourcing from within their own country for a long time. And in fact, in the US, 47% of their supplies come from within their own state.

So if you take, let's say, Thomas Orr, who sells home furnishings from his company, S&O Company, he's based in Rome, Georgia. He has a relationship with a lumber contractor in Atlanta. It's about an hour and a half from his home. And that's where he's been going to source his raw materials since he started his shop, and he's been able to maintain strong and steady supply chains there.

BRIAN SOZZI: I think you-- I think Etsy got unfairly looped in with being a reopening trade. I was talking to one of my contacts on the street that follow you, Josh, and he said they're saying-- they are saying that you've settled into more consistent activity on the platform. Is that correct? And how have you made that happen?

JOSH SILVERMAN: It's incredibly encouraging. So it would have been reasonable to assume that, when the world reopened, Etsy would see some decline in sales. And let's remember, at this time one year ago, in November of 2020, COVID was exploding. Hospitals were full. And many states were in lockdown. So people were not allowed to leave their homes, or if they did leave their homes to go shopping offline, many stores were closed. People had very few choices, and so they had to go to Etsy. Etsy, in Christmas of 2020, was one of the few places you could count on to reliably be open and shipping.

Now we're in November of 2021, and there's an explosion of choice. And yet, people are choosing to return to Etsy over and over again. In fact, in spite of all of that choice, we're expecting sales to grow, and grow meaningfully, in the fourth quarter. And that's because, yes, we've added new buyers. There's a lot of people who've come to Etsy who'd never shopped before. And that's-- never shopped on Etsy before. Many of them had never shopped online before. In the third quarter, we added 7 million new buyers, just in the third quarter alone.

But not only are we adding new buyers, but actually our existing buyers are buying even more from Etsy than they did before. So the average existing buyer had 5.2 purchase days over the trailing 12 months, where pre-pandemic it was 4.9 purchase days. So in spite of a lot more choice, people are coming back and buying even more often on Etsy.

BRIAN SOZZI: We've talked to you a lot, Josh, over the past few years, and it has always been the competitive environment in online retailing. It never eases up. But since we last spoke, we've had Macy's come out here saying they're going to launch a marketplace, Bed Bath Beyond, marketplace, Walmart adding more items onto its website. How does that-- how do you think that will change what you do?

JOSH SILVERMAN: Yeah, I've never envied those folks managing, you know, retail spaces and hourly employees and, you know, all the challenges, logistics and supply chain and all those challenges that are so difficult for the offline retailers. So I'm not surprised they're trying to move online now.

And there's going to be-- there's always been thousands of places you can go and buy the same thing online. And so now there'll be 1,005 or 1,110. Etsy does something different. We're not trying to do the same thing as everyone else. Everyone else is out there trying to compete with Amazon, and so they've got to find a way to sell that same product for $0.02 cheaper or ship it two minutes faster. And I wish them the best of luck.

At Etsy, we stand for something truly different. We're a place that you can go and buy from the person that actually made the item. You can buy things that actually express your sense of identity. You can co-create them together with the maker. These are things that come with a story. And that's something Etsy uniquely stands for. And so there's always going to be a ton of competition in retail, but what's important is our brand stands for something different, and we're getting ever better at really delivering that in a really meaningful way and at scale.

BRIAN SOZZI: Well, clearly, your stock price is hovering around a record high, so you're doing something right. Josh Silverman, Etsy CEO, always nice to see you. We'll talk to you soon.

JOSH SILVERMAN: Thank you for having me.